Are you writing a business plan for you home business? Do you really need one?

Why writing a business plan for a home business? A home business like any other needs a road map to a new destination. If you do not use one, you will end up lost before you get to your destination.

Every business no matter how small it is, must a have a business plan. You may not need a “formal” business plan document but you definitely need a “business plan” for you home business.

A formal business plan is a very long detail document with about 80-100 pages. A home business may not need this kind of elaborate plan, but writing a business plan is not an option. It is critical for your business.

Writing a business plan for your home business plan is just your “strategic planning.” You want to cover at least four major elements: 1) Your home business description and elements, 2) Your marketing plan, 3) Your financial plan, 4)) Your operations plan

1) Your Home Business Description and Elements: This element covers what kind of business you are doing. Regardless of your home business of choice, at the very minimum, you need to have the following:

• Why: What is your main purpose of having home business? If it is just money, you may want to reconsider. Any business has to be driven by some sort of desire besides the financial rewards. This desire will give you the self-motivation that you need to do it; otherwise, you are setting yourself up to fail.
• What: What is your home business? What is your product or service? What is your focus?
• When: When do you plan to do it? Do you plan to work every day for 2-3 hours or 10 hours a day? Did you notice I said every day?
• Where: The location is probably your home, but where in your home. Do you have a designated space for it? Can you have everything you need available in this space?
• How: how you are going to execute? Is your business a one-person show? Do you need an assistant or a particular tool? Who is involved in your business?

2) Your Home Business-Marketing Plan: When writing a business plan, marketing is crucial. At the beginning, you can do many things. In addition, there are many that you do not know and you are not familiar with, however, at the very least, plan what you know.

• Do you need a website or a blog?
• How do you plan to get clients? Do you need word of mouth referrals? Do you need friend’s referrals or other local business referrals?
• What is your market? Who is your target audience? Age, gender, and location, are important elements.
• What are you customer needs? What problem are you trying to solve for them?
• Who is your competition? How can you be better than they can?

3) Your Financial Plan: Although there are many home businesses that do not need a lot of money to start, you do need some capital to start and some to maintain. Do you know how much that is? Can you afford to start a business? Are you banking in your business to produce and maintain itself right away? If the latter is the case, you may want to reconsider. It will be a shame to put many hours of work and count in income you are not sure is going to come.

4) Your Operations Plan: This is your initial description on you plan of action

• List your priorities
• List your short-term items and have a dateline
• List your long-term items and have a dateline
• List your daily actions
• Schedule your daily actions and your priorities

Although many home businesses have started with nothing in place, most have fail for not having something in place from the start. Writing a business plan does not guarantee success but it does guarantee you clarity in what you want to do and how to accomplish it.

This plan is necessary to utilize during your road trip. You adjust as you go. You correct and continue. It may be in just 5 pieces of paper, but if you did your homework, may be that is all you need to start and become successful.

If you are preparing to raise capital from either an investor or a bank, you’re probably writing a business plan. Here are five of the most common mistakes that I have seen as a result of my experience as a corporate-finance consultant:

Submitting the Plan to the Wrong PeopleI have actually heard entrepreneurs say, “I don’t know why I can’t raise any money. I’ve sent my business plan to hundreds of people!” Don’t make this same mistake.

You should first determine that your prospective investor or lender has an interest in your industry and your business. Do this by making a call or sending an introductory letter or e-mail. If you can receive a referral from an accountant, attorney, or banker, that is all the better.

Never, under any circumstances, should you send an unsolicited business plan. These are put at the bottom of the pile, and they are seldom read or given serious consideration. If you determine that your prospect has an interest, send over only the executive summary for review, unless otherwise requested.

Incomplete Executive SummaryThe first thing that all prospective investors and lenders will want to read is your executive summary. This section should be no more than two pages, but three is the absolute maximum. When you write your business plan, the executive summary should be prepared last. (After all, how can you summarize something that has not yet been written?)

The summary should be broken down into five sections, each of which should be no more than one or two paragraphs long. These five sections are:

• The Opportunity: Describe the need that is currently unfilled in the marketplace; if the need is being filled, discuss how it is not being adequately met.
• The Solution: Describe your solution to the problem, and why it is better than what is currently available.
• Management: Describe why you and your team are qualified to deliver the solution that you have proposed.
• Market Size and Share Expectations: Describe how large the market is for your solution, and discuss how much of that market you intend to capture.
• Financing Need and Exit Strategy: Describe how much money you need and what it will be used for, but close with how you intend to provide the investor with an exit strategy.

Weak Management

Either agree to hire full-time executives or bring skilled directors onto the board. If you are searching for funding from angel investors, you might offer executive management positions to those investors who have significant experience in the industry. Venture capitalists, on the other hand, are not likely to invest until the management team is complete.

Unreasonable Financial ProjectionsAll lenders and investors are accustomed to seeing financial projections that go in only one direction — up!

While every business owner and entrepreneur has the best of intentions when preparing a forecast for the next five years, it is seldom realistic to assume that sales will grow by 50-100% each and every year.

It is also not likely that gross and operating profit margins will improve forever.

Your assumptions with respect to working capital turnover, earnings retention, debt/equity mix, and return on invested capital must all be reasonable. If you forecast that your business will return 100% or more on its invested capital during each of the next five years, you are going to have some explaining to do. That does not mean that it is not possible, just that it’s not probable. (See this article on developing solid financial projections [http://www.growthcurveservices.com/articles/persuasive-projections.html].)

Greed!Nothing will ruin a deal faster than greed. If your business is little more than an idea at this point, it is not feasible to value the company at millions of dollars. If your plan is to raise $2 million in exchange for 10% of the business (i.e., a $20 million valuation), you are going to have a tough time attracting the interest of venture capitalists and angel investors.

Spend less time worrying about the valuation today, and instead focus on structuring the transaction so that you can re-acquire a majority ownership interest in the future.

Moreover, don’t be too quick to equate majority ownership with control. You might be able to sell non-voting stock that does not give away control of the business.

Take steps to ensure that you’ve thought about these five points before you submit your business plan, and you’ll almost certainly be a step ahead of others who are competing for funding or financing.

One of the sections that all investors will read first is the discussion on management. If you do not have direct, significant experience in the industry in which you’re trying to start your business, add someone to the management team who makes up for your weakness.

When we think of a business, whether it is online or offline, whether it is residual income business or a one time profit sale, we always, and I mean, every time need a business plan. Why is it so necessary? Have you ever failed in a business and said to yourself that this was not the business for me? Then read on, because I am going to shed some light on this important aspect of having a business plan and why you failed in the business because of not having it. But, first let me ask you a question.

Have You Ever Joined An Opportunity, Which You Thought is The Best For You To Earn Money But You Failed?

I think your answer would be yes. Then why did you fail or are not getting results the way you desired? Think about what did you do wrong. The one answer which will creep into your mind would be, I did not have a good plan to grow my business. This is nothing but a business plan. A step-by-step action plan we create for ourselves and follow it no matter what other things come in between.

What Is An Effective Business Plan?

What exactly is an effective business plan? It is nothing but, how you are going to perform your day-to-day activities to achieve your goals in your residual income business. It gives you a work plan to do every single day. And, most importantly, you get satisfied if you complete the days’ work and are happy that things for today are completed, even if you do not get results tomorrow. This is the main reason to have a business plan. Because, if you are happy with what you do today, you will do it more effectively tomorrow. And you will get better results if you continue to do it everyday.

Using A Business Plan As A Tool To Grow Your Business.

Yes, you heard it right, it is indeed a tool in your way to growth of your residual income business. It is how you are going to work for your prosperity and financial freedom. It is how you are going to approach certain aspects like creating a website, generating traffic to it, how you are going to follow up to your potential prospects, what ways of traffic generation you are going to use. Every single thing comes under your business plan, and it will enhance your productivity to your own business. With it, you would be able to know what works and what does not work in your business, and most importantly, which method works for you.

So, Is It Necessary?

I would say yes, it is necessary and ask you to go ahead and create a business plan, do not think about the results you will get, just think about what you are going to do everyday?, how you are going to do it?. Write it down on a piece of paper or on the notepad of your PC, and follow it day in day out, sooner, or later you will edit it, or make it more complex, and get better results from it.